Relevant Information for Decision Making Essay

7852 Words Aug 20th, 2013 32 Pages
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Chapter 10—Relevant Information for Decision Making

MULTIPLE CHOICE

1. Costs forgone when an individual or organization chooses one option over another are a. | budgeted costs. | b. | sunk costs. | c. | historical costs. | d. | opportunity costs. |

ANS: D PTS: 1 DIF: Easy OBJ: 10-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling

2. Which of the following costs would not be accounted for in a company's recordkeeping system? a. | an unexpired cost | b. | an expired cost | c. | a product cost | d. | an opportunity cost |

ANS: D PTS: 1 DIF: Easy OBJ: 10-1 NAT: AACSB:
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a. | acquisition cost of the old machine | b. | outlay to be made for the new machine | c. | annual savings to be enjoyed on the new machine | d. | life of the new machine |

ANS: A PTS: 1 DIF: Easy OBJ: 10-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling

7. If a cost is irrelevant to a decision, the cost could not be a. | a sunk cost. | b. | a future cost. | c. | a variable cost. | d. | an incremental cost. |

ANS: D PTS: 1 DIF: Easy OBJ: 10-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling

8. Which of the following costs would be relevant in short-term decision making? a. | incremental fixed costs | b. | all costs of inventory | c. | total variable costs that are the same in the considered alternatives | d. | the cost of a fixed asset that could be used in all the considered alternatives |

ANS: A PTS: 1 DIF: Easy OBJ: 10-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling

9. The term incremental cost refers to a. | the profit foregone by selecting one choice instead of another. | b. | the additional cost of producing or selling another product or service. | c. | a cost that continues to be incurred in the absence of activity. | d. | a

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